Economic Benefits and Costs of Logistic Zones


Economic Benefits Economic Costs
  • Employment creation (direct, indirect, induced).
  • Attracting capital investment.
  • Increased distribution efficiency and lower costs to consumers.
  • Innovation in industry (practices).
  • Increased trade and cross-border traffic.
  • Reduced congestion and emissions.
  • Opportunity cost of public fund usage.
  • Additional burden on taxpayers.
  • Loss of economic opportunities (redundant businesses shut down).
  • Negative community impacts.
  • Benefits. Job creation is one of the most common expected economic benefits from the setting or expansion of a logistic zone, either direct (employment in the zone), indirect (such as service employment) or induced (employment derived from greater flows along the supply chain). The development of a logistic zone is also prone to attract additional capital investment in infrastructure, expanding the quantity and quality of regional transport infrastructures. Improvements in freight distribution are associated with a better level of inventory management and lower costs to customers. New logistics firms bring with them innovative and best practices, namely with technology such as information systems. Trade, both exports and imports, is promoted inciting comparative advantages. A better rationalization of distribution is also associated with reduced congestion and lower environmental emissions.
  • Costs. Since many logistic zone projects a financed in whole or in part by public funding, there is an opportunity cost since the funds allocated to the project will not be available for other projects. The public capital provided is therefore a burden to the taxpayers. As a logistic zone often incite the rationalization of the regional freight distribution system, some corporations may take this opportunity to close down less efficient facilities as well as supply chains that are less performing. The site of the logistic zone is also likely to have negative community impacts with more traffic on local roads and noise. These impacts can however be mitigated with proper planning.